Day Trading – How tough can it be?

When an outsider looks at the stocks and sees how different stocks move each day one would initially assess that making money through day trading should be easy , after all you have to do is follow the momentum – but is it really that easy? Let’s find out.

Day trading if done judiciously and with discipline can give a significant amount of income maybe even replace your job but if done carelessly can turn into a nightmare. Sometimes even professional traders get beaten by the market so for newcomers it is extremely hard to stay in the market because of one golden rule in the market – everyone loses money – there is not a single trader/investor who hasn’t lost money in the market. Many people who think that can make a quick buck in the market end up losing most of their money and end up leaving the market and professional traders profit most from these kind of traders.

When trading in the market there are some extremely important rules everyone needs to follow if they want to make money i.e. target and stop-loss. Trading without target and stop-loss is like driving a vehicle without brakes , an accident just waiting to happen. Target is the target price you want the stock to reach before exiting whether it is shorting or going long and stop-loss is the price at which you would exit the trade if you the stock has performed reverse of your expectations , either way both exit points should be clearly identified and practiced with discipline. What most traders who suffer loss do is let there losers run and give themselves a bigger loss or exit a winning too early again giving them a loss. Discipline in such cases is one of the trademarks of a good trader.

Now we talk about the strategy. A strategy is what one uses to execute his/her trade. By merely looking at the charts one cannot assume about the direction the stock will go in thus the requirement of a solid backtested strategy which would work in all kinds of market. Developing a strategy is one of the hardest tasks while dealing with the matters of day-trading – one that creating it is extremely difficult and sometimes even a good backtested strategy can fail.

Next thing is practice. They say when you start trading that the first five years are just trial and error. The real trading starts after five years when you are finally trained in the ways of trading , when you have seen and made every profit and loss . After such time it is crucial that one always remains humble about their strategies and keep back-testing them time and again so it gives you an edge in the market.

Lastly the non-technical part of trading – keep your emotions out of the room while trading. Greed and fear in such cases can lead to extreme losses and keep you away from making a good trade.